On May 12, 2009, the Québec government introduced Bill 42, which provides a framework for a provincial greenhouse gases ("GHG") cap-and-trade system, the details of which are to be fleshed out at a later time by the government in regulations and orders. Key components of Bill 42 include the establishment of a public registry, GHG reduction targets for regulated sectors using 1990 as the baseline and a cap-and-trade system. Emission units would be obtained either by allocation or auction or through a cap-and-trade system with trading expected to be carried out on the Montreal Climate Exchange. Fees collected from emitters would be paid into a fund for climate change initiatives.

If passed, Bill 42 will enable Québec to meet its commitments in the Western Climate Initiative, a group of seven U.S. states and four Canadian provinces (British Columbia, Manitoba, Ontario and Québec) that have agreed to a common GHG emissions reduction target and are committed to a regional cap-and-trade system. British Columbia has already enacted climate change legislation to enable it to establish a cap-and-trade system and Manitoba and Ontario are expected to follow suit shortly. These provincial regimes will differ from the intensity-based approaches currently used in Alberta and proposed by the federal government.

Continued regulatory uncertainty has led to a growing consensus among Canadian business leaders on the urgent need for a clear and cohesive national carbon policy that would be compatible with the proposed U.S. carbon regime. However, given the current disparity between provincial and federal policy directions, a national carbon policy seems unlikely over the short term.

If you would like additional information about Bill 42, please contact Marc-André Boutin (514.841.6527) or Michel Pelletier (514.841.6455) in our Montréal office or Sarah Powell (416.367.6931) or Alexandria Pike (416.367.6989) in our Toronto office.

Davies Ward Phillips & Vineberg LLP, with over 250 lawyers, practises nationally and internationally from offices in Toronto, Montréal, New York and an affiliate in Paris and is consistently at the heart of the largest and most complex commercial and financial matters on behalf of its North American and overseas clients.

The information and comments herein are for the general information of the reader and are not intended as advice or opinions to be relied upon in relation to any particular circumstance.  For particular applications of the law to specific situations, the reader should seek professional advice.